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I don’t understand this question. Pls help me sir.
At the start of the year, Joe had an allowance of $700 against receivables. During the year $450 of this amount went bad and $150 was received; the balance remained unpaid at the year end. Another amount of $170 went bad. A the year-end it was decided to provide for a new debt of $240.
What was the total irrecoverable debt expense for the year?The expense in the Statement of profit or loss is:
irrecoverable debts written off – any irrecoverable debts recovered + any increase in the allowance for receivables (or minus any decreases in the allowance).
You need to watch the free lectures on irrecoverable and doubtful debts.
i don’t understand how to find the allowance required at the end of the year?
Hi John
Q2 of the test refers. This was my working:
Rcvbls(173760-2040=171720). Gen.Allow.for Doubtful Debts(171720*2%=3434.40). Change Reqd to bring Allow.to this yr’s fig is (3434.40-5376=-1941.60 )which I credited the Allow.for Rcvbls with, together with the 3434.40 above. I then credited the Irrecov.Debt Exp with the 1941.60 to get a Bal.of $98.40. Could you kindly explain where I made a mistake?
RegardsThe question says that the irrecoverable debts were written off during the year.
Therefore, the receivables balance at the end of the year of 173,760 is already after removing the irrecoverable debts – so they are not removed again in calculating the allowance required.
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